Comments from RBC this weekSeptember 16, 2024
Gibson Energy Inc.
Highlights from RBC Desk Presentation
Our view: We recently hosted Curtis Philippon (CEO) and Sean Brown (CFO) for an update. While it is still very early days as Curtis' appointment as the new CEO was effective on August 29, we believe there remains a commitment to the core financial principles. Further, we think that under Curtis' leadership, Gibson Energy is likely to re-focus its growth efforts in addition to re-shaping the company's culture.
Key points:
Getting to know the new CEO, but it is still very early days. Our sit down helped provide a forum for an in-person meeting with Curtis Philippon. Understandably, there was little to say with respect to material changes in strategy given he had only been in the CEO role for roughly two weeks. However, our discussions lead us to believe that investors can expect no changes to the core financial principles, with the company also re-focusing its efforts on how to leverage its infrastructure footprint to grow the business.
Commitment to the core financial principles. The company appears to be highly committed to long-term contracted energy infrastructure assets, maintaining leverage in the 3.0-3.5x debt/EBITDA range, and a growing dividend underpinned by cash flow growth that maintains a payout ratio below 80% of DCF/share. The company continues to be open to share buybacks, while noting that allocating capital to new investments will be compared against the benefits of buybacks. With that, Gibson Energy renewed its normal course issuer bid for an additional one-year period. We believe investors positively view the company's existing financial guiding principles, and a reiteration by the new CEO should be well-received.
Re-focusing the growth efforts, but still too early to pin it down. We believe one of the reasons that Curtis was chosen as CEO was his prior experience profitably growing Certarus, and managing the growth of the overall organization. Based on our discussions, it appears that the focus for Gibson Energy will continue to be on energy infrastructure, but it is too early to pin down specific asset types or geographies. However, we note that Certarus' growth was largely built on organic projects, and management believes that the market under-appreciates Gibson Energy's organic growth opportunities.
Investor Day seems likely in H1/25. While nothing has been confirmed, we believe the company may look to hold an Investor Day in the first half of 2025 where Curtis and the rest of the executive team will outline the company's strategy, which we expect will include the approach to growth (including geographical focus and platforms, and M&A), financing and overall capital allocation.